Research In Motion: Investors Should Jump Ship As Earnings Sink

A few weeks ago, I released a positive articleregarding Research In Motion (RIMM), This is the update. To surmise the positive article: As long as the earnings remained consistent or decline very little, then RIMM is dramatically undervalued and could be looked at by some value investors.

It now seems that the tides have turned rather dramatically against RIMM. I see no value in this company until we are looking at a price between $7-$9. I understand that this is a dramatic decrease from what I’ve said previously ($14-$15) and I will explain why in this article.

It seems that investors are getting all excited lately over the news that several firms were interested in potentially acquiring RIMM. Microsoft (MSFT), Amazon (AMZN) and Nokia (NOK) have all had an interest in RIMM. Suddenly the stock shoots up 10% and only because people were willing to take a look at RIMM. Unfortunately, no one went through with the potential deal, which would have saved shareholders from the serious losses they have incurred.

Now, some people are saying “well if they were willing to buy higher than this has to be some sort of potential floor for the stock," and they would be 100% wrong. Nothing short of a massive shareholder riot is going to force the co-CEOs to do anything or the board to do anything that is positive for this firm. As this timely process (being led by a small firm known as Jaguar Financial in Canada) goes on, RIMM earnings have been slashed with an axe. RIMM continues to lower its guidance each quarter and they lack the clarity to be able to project guidance for the future accurately.

Earnings are depleting rapidly and it does not look like they have anything to stop this. Playbook sales (those that aren’t being stolen on a truck in Illinois) are pitiful, the recent BlackBerry release which held so much promise is turning out to be worthless, and just recently BGR has shown us that the new BlackBerry 10 is deplorable. (click here).

As earnings continue to deteriorate at an ever-increasing pace it tells me that the value left in this firm is destroyed. I don’t think anyone is going to see a buyout of RIMM until the price is substantially below the $10 mark – even then I think the buyer is merely doing it for the patents. I suggest using this run-up in price to take a nice short position.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.